Advertisement
Increasing participant engagement in retirement plans is an ongoing and evergreen challenge, one that SECURE 2.0 provisions going into effect in 2024 may help mitigate, according to a new report from Cerulli Associates.
The two generating the most interest are offering financial incentives to encourage employee participation in the plan (28%) and matching employee retirement contributions on a Roth basis (27%).
“Enthusiasm for financial incentives to encourage employee participation in the plan suggests that plan sponsors would appreciate creative ways to incentivize engagement with the retirement plan, a perennial challenge for plan sponsors,” the Boston-based Cerulli wrote.
The third optional provision receiving high interest from plan sponsors is offering an in-plan emergency saving account to non-highly compensated employees (26%). Emergency savings has been a significant area of focus in the retirement industry as plan sponsors and retirement plan providers seek to enhance the financial wellness of plan participants. SECURE 2.0 allows employers to offer pension-linked emergency savings accounts (PLESAs) to non-highly compensated employees, but recordkeepers cite challenges in implementing these accounts.
About two-thirds (68%) of recordkeepers indicate that of the notable SECURE 2.0 provisions (both optional and required), PLESAs would be one of the most difficult to implement. Some industry stakeholders cite concerns about the added administrative burden associated with these programs and the potential for participant misuse.
Other provisions, including catch-up contributions subject to Roth treatment for high-earning employees and acceptance of saver’s match contributions from the government for low-earning employees, are ranked as difficult to implement by 37% and 32% of recordkeepers, respectively.
“Considering these challenges, recordkeepers should evaluate which provisions will be meaningful for plan sponsors before dedicating the time and resources to implement them,” Cerulli analyst Elizabeth Chiffer said in a statement.
“Recordkeepers should incorporate the discussion of optional SECURE 2.0 provisions into larger conversations about effective plan design; it is imperative that recordkeepers appropriately address the needs of plan sponsor clients and ensure they are equipped to deliver a plan design that suits participant needs,” she concluded.
Advertisement
